BILL NUMBER: AB 729 CHAPTERED 09/22/05 CHAPTER 312 FILED WITH SECRETARY OF STATE SEPTEMBER 22, 2005 APPROVED BY GOVERNOR SEPTEMBER 22, 2005 PASSED THE ASSEMBLY AUGUST 29, 2005 PASSED THE SENATE AUGUST 23, 2005 AMENDED IN SENATE AUGUST 17, 2005 AMENDED IN SENATE JUNE 22, 2005 AMENDED IN ASSEMBLY MAY 3, 2005 AMENDED IN ASSEMBLY APRIL 14, 2005 INTRODUCED BY Assembly Member Koretz FEBRUARY 17, 2005 An act to amend Sections 510, 1647.5, 1720, 1775.2, 1775.4, 1775.5, 12921.1, 12921.15, and 12921.3 of, and to add Sections 1681.5 and 1736.5 to, the Insurance Code, and to repeal Section 12253.5 of the Revenue and Taxation Code, relating to insurance production agencies. LEGISLATIVE COUNSEL'S DIGEST AB 729, Koretz Production agencies: regulation. Existing law generally regulates the business of insurance, including insurers, brokers, agents, and production agencies. Existing law requires a limited liability company, at the time of licensing as an insurance production agency and at all times during which it transacts business, to provide security for claims against it, as specified. Existing law requires this type of company to disclose various kinds of information to the commissioner. This bill would make certain changes to the nature of the security required under this provision, and would impose additional disclosure requirements on limited liability companies, as specified. It would allow the commissioner to summarily deny or decline to act upon an application for the issuance or renewal of a license, or to summarily inactivate an existing license, for failure to comply with these requirements, and would also allow the commissioner to impose administrative penalties in connection with the filing of false or misleading information. Existing law requires that an applicant for a license as an agent or broker pass a licensing examination administered by the Department of Insurance. This bill would prohibit cheating, subverting, or attempting to subvert any licensing examination given by the department. A willful violation of this provision would be a misdemeanor. By creating a new crime, the bill would impose a state-mandated local program. The bill would require the Insurance Commissioner to impose certain administrative sanctions on a person who violates this provision. Existing law imposes various regulatory requirements on insurance agents, brokers, and production agencies. This bill would make specified changes and additions to certain of these requirements relating to the issuance and renewal of licenses, and the disclosure of information to the commissioner and the public. The bill would make other changes, as specified. The bill would incorporate changes made by SB 367 that would become operative if both bills are enacted and this bill is enacted after SB 367. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 510 of the Insurance Code is amended to read: 510. Whenever a policy of insurance specified in Section 660 or 675, a policy of life insurance as defined in Section 101, a policy of disability insurance as defined in Section 106, or a certificate of coverage as defined in Section 10270.6, is first issued to or delivered to a new insured or a new policyholder in this state, the insurer shall include a written disclosure containing the name, address, and toll-free telephone number of the unit within the Department of Insurance that deals with consumer affairs. The telephone number shall be the same as that provided to consumers under Section 12921.1. The disclosure shall be printed in large, boldface type. The disclosure shall also contain the address and customer service telephone number of the insurer, or the address and customer service telephone number of the agent or broker of record, or all of those addresses and telephone numbers. All addresses and telephone numbers for the insurer or the agent or broker of record shall be prominently displayed, in boldfaced type. The disclosure shall also contain a statement that the Department of Insurance should be contacted only after discussions with the insurer, or its agent or other representative, or both, have failed to produce a satisfactory resolution to the problem. If the policy or certificate was issued or delivered by an agent or broker, the disclosure shall specifically advise the insured to contact his or her agent or broker for assistance. SEC. 2. Section 1647.5 of the Insurance Code is amended to read: 1647.5. (a) Each limited liability company, at the time of licensing pursuant to this chapter and, with respect to surplus line brokers, Chapter 6 (commencing with Section 1760), and at all times during which the company holds an active license, is required to provide security for claims against it as follows: (1) For claims based upon acts, errors, or omissions arising out of the practice of insurance agency, brokerage, or surplus line brokerage, a licensed limited liability company providing insurance agency, brokerage, or surplus line brokerage services shall comply with the requirements of subparagraph (A) or (B), or pursuant to subdivision (b), some combination of those requirements. (A) (i) Maintain a policy or policies of insurance against liability imposed on or against it by law for damages arising out of claims in an amount for each claim of at least one hundred thousand dollars ($100,000) multiplied by the number of licensees rendering professional services on behalf of the company, with a minimum required amount of five hundred thousand dollars ($500,000); however, the maximum amount of insurance is not required to exceed five million dollars ($5,000,000) for claims initially asserted in any one calendar year, less amounts paid in defending, settling, or discharging those claims. In addition, the policy shall contain, at a minimum, a provision that the policy cannot be nonrenewed, canceled, or terminated, without providing written notice to the commissioner within 10 days. (ii) An applicant who wishes to satisfy the requirements of this section wholly, or in part, by maintaining a policy or policies of insurance as set forth in clause (i) shall submit to the commissioner a certification of coverage pursuant to subdivision (d). If a license is automatically issued or renewed without providing this certification, the license may be inactivated by the commissioner upon discovery of the lack of compliance with this paragraph. (iii) If the policy specified in clause (i) contains a deductible or self-insured retention and the policy provides that the insurer is ultimately responsible for payment of the total amount of the claim up to the policy limits, including the deductible or retention, the policyholder shall not be required to maintain security for payment of its deductible limit or self-insured retention liability under the terms set forth in subparagraph (B). (iv) If the policy specified in clause (i) contains a deductible limit or self-insured retention and does not provide that the insurer is responsible for payment of the total amount of the claim up to the policy limits, the policyholder shall maintain security for payment of its deductible limit or self-insured retention under the terms set forth in subparagraph (B). (B) Maintain in trust or bank escrow, cash, bank certificates of deposit, United States Treasury obligations, bank letters of credit, or bonds of insurance companies as security for payment of liabilities imposed by law for damages arising out of all claims in an amount of at least one hundred thousand dollars ($100,000) multiplied by the number of licensees rendering professional services on behalf of the company, with a minimum required amount of five hundred thousand dollars ($500,000); however, the maximum amount of security is not required to exceed five million dollars ($5,000,000) for claims initially asserted in any one calendar year, less amounts paid in defending, settling, or discharging those claims. (b) For purposes of satisfying the security requirements of this section, a limited liability company may aggregate the security provided by it pursuant to subparagraphs (A) and (B) of paragraph (1) of subdivision (a). (c) At the time of licensing pursuant to this article, limited liability companies shall file with the commissioner information, in the manner prescribed by the commissioner, and accompanied by all documentation requested by the commissioner, demonstrating compliance with the financial security requirements of this section. Limited liability companies shall also file an annual confirmation with the commissioner, at a time and in a manner, and with documentation, prescribed by the commissioner, demonstrating continuing compliance with the financial security requirements of this section. (d) If the security requirements of this section are satisfied wholly, or in part, with an insurance policy, then a certification of coverage shall be submitted to the commissioner by the licensee or applicant, and signed by an authorized agent or employee of the insurer. The certification of coverage shall be in the following form: Department of Insurance Limited Liability Company Certification of Coverage Under Section 1647.5 of the California Insurance Code I hereby certify that the insurance company listed below has issued a policy or policies of insurance as follows: Insured Name: ___________________________________ License Number: _________________________________ Company Name: ___________________________________ Address: ________________________________________ Policy Number(s): _______________________________ Insurance Company: ______________________________ Policy Effective Date: __________________________ Policy Expiration Date: _________________________ Specify whether blanket or individual policy: ___ Specify number of licensees rendering services: _ I hereby certify that the limited liability company named above is insured against claims arising from errors and omissions as defined and described in the amounts and limits set forth in Section 1647.5 of the California Insurance Code. I understand and agree that the insurance coverage for the entity and person(s) insured under this policy or policies may not be terminated, canceled, or nonrenewed, regardless of cause or reason, without providing written notice to the commissioner within ten (10) days. Signature: ____________________ Date: ___________ (Insurance Company Representative) Title: __________________________________________ (e) The commissioner may summarily deny or decline to act upon an application for the issuance or renewal of a license, or may summarily inactivate an existing license, for failure to comply with the requirements of this section. (1) If the commissioner inactivates a license for failure to comply with the requirements of subparagraph (A) of paragraph (1) of subdivision (a), the effective date of the inactivation shall be the date on which the insurance policy or policies used to satisfy that requirement expire or are canceled, as indicated by the expiration date specified on the certification of coverage filed pursuant to subdivision (d) or by a notification received from the insurer of termination, cancellation, or nonrenewal of coverage. (2) If the commissioner inactivates a license for failure to comply with the requirements of subparagraph (B) of paragraph (1) of subdivision (a), or with the requirements of subdivision (b), the effective date of the inactivation shall be the date set by the commissioner as the deadline for demonstrating compliance with those provisions. (3) Within 10 working days of the date of inactivation under this section, the commissioner shall send by certified mail to the licensee's address, as reflected in the commissioner's records, a notice to the licensee of the inactivation of the license. (4) A license that has been inactivated pursuant to this section shall be reactivated if, within 30 days of the date of inactivation, the licensee demonstrates, in the manner prescribed by the commissioner, satisfaction of the requirements of subparagraph (A) or (B) of paragraph (1) of subdivision (a), or the requirements of subdivision (b), and includes any fees, penalties, and any other required licensing documents necessary to reactivate the license, including new company appointment forms, bonds, and any new business entity endorsements as required. If a certification of coverage is provided to demonstrate compliance with these requirements, and the certification indicates that the insurance policy or policies have been in effect continuously from the date of the inactivation, the license shall be reactivated retroactive to and including the date of inactivation. If the certification of coverage shows an effective date for the insurance policy or policies later than the date of inactivation, the license shall be reactivated as of the effective date of the policy or policies. (f) Any licensee who, acting alone or in concert with others, willfully or knowingly causes or allows to be filed with the commissioner for the purpose of demonstrating compliance with this section a certification of coverage described in subdivision (d), or any other document required by this section, that is false, fraudulent, or misleading, shall be subject to administrative penalty, including suspension or revocation of the licensee's license, after notice and hearing as provided for in the Administrative Procedure Act. However, nothing in this section shall entitle a licensee to notice or hearing on the summary denial of an application or the summary inactivation of a license pursuant to subdivision (e). (g) The commissioner may disclose on the department's Internet Web site the names and license numbers of those licensees whose licenses have been inactivated or who have been penalized due to noncompliance with this section. The commissioner may also report that information to the National Association of Insurance Commissioners (NAIC). (h) The commissioner may adopt regulations as necessary to implement this section. SEC. 3. Section 1681.5 is added to the Insurance Code, to read: 1681.5. (a) No person shall cheat on, subvert, or attempt to subvert, any licensing examination given by the department, including, but not limited to, engaging in, soliciting, or procuring any of the following: (1) Any communication between one or more examinees and any other person, other than a proctor or examination official, while the examination is in progress. (2) The taking of all or a part of the examination by a person other than the applicant. (3) Possession or use at any time during the examination or while the examinee is on the examination premises of any device, material, or document that is not expressly authorized for use by examinees during the examination, including, but not limited to, notes, crib sheets, textbooks, and electronic devices. (4) Failure to follow any examination instruction or rule related to examination security. (5) The provision of false, fraudulent, or materially misleading information concerning education, experience, or other qualifications as part of, or in support of, any application for admission to any examination. (b) Any person who willfully violates this section is guilty of a misdemeanor punishable by a fine not exceeding ten thousand dollars ($10,000) or by imprisonment in a county jail not exceeding one year. (c) The commissioner shall bar any candidate caught willfully cheating under this section from taking any license examination and from holding an active license under any provision of this code for a period of five years. SEC. 4. Section 1720 of the Insurance Code is amended to read: 1720. (a) A licensee who has applied to renew a license under this chapter shall be entitled to continue operating under the existing license for 60 days after its specified expiration date, or until notified by the department that the renewal application is deficient, whichever comes first, if the applicant has satisfied all license renewal requirements, including, but not limited to, the following: (1) The submission of the applicable renewal application and fee on or before the expiration date of the license. (2) The satisfaction of all required continuing education or training requirements. (b) This section shall not apply to any license that is suspended or revoked. SEC. 5. Section 1736.5 is added to the Insurance Code, to read: 1736.5. (a) Every licensee and applicant shall promptly reply in writing to an inquiry from the commissioner relative to an application for, or the retention or renewal of, a license, or an investigation relating to a consumer complaint or a matter relating to a producer licensing background change reporting requirement under Section 1729.2. The commissioner may revoke, suspend, or refuse to issue or renew a license if the licensee or applicant does not promptly reply in writing to an inquiry from the commissioner. (b) For purposes of this section, "promptly reply" means to provide a written response to the inquiry that is received by the commissioner no later than 21 days after the date the inquiry was mailed or otherwise communicated to the applicant or licensee. (c) For purposes of this section, the term "licensee" and "applicant" have the same definitions as those contained in paragraph (3) of subdivision (c) of Section 1729.2, and the licenses covered by this section are the same as those covered by paragraph (1) of subdivision (c) of Section 1729.2. SEC. 6. Section 1775.2 of the Insurance Code is amended to read: 1775.2. On or before February 1 of each year, the commissioner shall post on the department's Internet Web site the installment payment forms prescribed by the commissioner to accompany surplus line tax remittances if monthly installment payments are required by Section 1775.1. Failure to secure those forms shall not relieve any broker from making or paying monthly installment payments. SEC. 7. Section 1775.4 of the Insurance Code is amended to read: 1775.4. (a) The amount of the payment shall be 3 percent of the gross premiums less return premiums upon business done by the surplus line broker under the authority of his or her license during the calendar month ending two calendar months immediately preceding the due date of the payment, as specified in Section 1775.3, excluding gross premiums and return premiums paid by him or her upon business governed by the provisions of Section 1760.5. If during any calendar month those return premiums upon business done by a surplus line broker exceed the gross premiums upon the business done by him or her in that calendar month, then no payment shall be payable by him or her in respect to that calendar month, and he or she may carry forward that excess to the next succeeding calendar month or months and apply it in reduction of the taxable premiums on business done by him or her in that succeeding calendar month or months. Even though no payment shall be payable by the broker, he or she shall file a return showing that his or her return premiums exceeded his or her gross premiums. (b) In determining the applicability of subdivision (a) of Section 1775.1 to a surplus line broker who has acquired the business of another surplus line broker, the amount of tax liability of the acquired broker for the immediately preceding calendar year shall be added to the amount of the tax liability of the acquiring broker for the immediately preceding calendar year. (c) All amounts paid, other than penalties and interest, shall be allowed as a credit on the annual tax imposed by Section 1775.5. (d) If the total amount of monthly installment payments for any calendar year exceeds the amount of annual tax for that year, the excess shall be treated as an overpayment of annual tax and be allowed as a credit or refund. (e) A penalty of 10 percent of the amount of the monthly payment due shall be levied upon and paid by any surplus line broker who fails to make the necessary payment within the time required, plus interest at the rate of 1 percent per calendar month or fraction thereof from the due date of the payment until the date payment is received by the commissioner, but not for any period after the due date of the annual tax. The penalty and interest shall be applied as prescribed in Section 12636.5 of the Revenue and Taxation Code. The commissioner may remit the penalty in a case where he or she finds, as a result of examination or otherwise, that the failure of, or delay in, payment arose out of excusable mistake or excusable inadvertence. (f) For any part of a payment required that was not made within the time required by law, when the nonpayment or late payment was due to fraud on the part of the taxpayer, a penalty of 25 percent of the amount unpaid shall be added thereto, in addition to all other penalties otherwise imposed. (g) The commissioner, upon a showing of good cause, may extend for not to exceed 10 days the time for making a monthly payment. The extension may be granted at any time, provided that a request therefor is filed with the commissioner within or prior to the period for which the extension may be granted. No interest shall be paid for the period of time for which the extension is granted. SEC. 8. Section 1775.5 of the Insurance Code is amended to read: 1775.5. Every surplus line broker shall annually, on or before the first day of March of each year pay to the Insurance Commissioner for the use of the State of California a tax of 3 percent of the gross premiums less return premiums upon business done by him or her under authority of his or her license during the preceding calendar year, excluding premiums upon business done by the provisions of Section 1760.5. If during any calendar year 3 percent of such return premiums upon business done by a surplus line broker exceed 3 percent of the gross premiums upon such business done by him or her in that year, then he or she may either carry forward such excess to the next succeeding year and apply it as a credit against 3 percent of gross premiums on such business done by him or her in such succeeding year, or he or she may elect to receive, and thereupon be paid a refund equal to the amount of taxes theretofore paid by him or her on such excess of return premiums paid over gross premiums received. For the purpose of determining such tax, the total premium charged for all such nonadmitted insurance placed in a single transaction with one underwriter or group of underwriters, whether in one or more policies, shall be allocated to this state in such proportion as the total premium on the insured properties or operations in this state, as computed on the exposure in this state on the basis of any single standard rating method in use in all states or countries where such insurance applies, bears to the total premium so computed in all states or countries in which such nonadmitted insurance may apply. This provision shall not apply to interstate motor transit operations conducted between this and other states. With respect to such operations surplus line tax shall be payable on the entire premium charged on all nonadmitted insurance, less the following: (a) Such portion of the premium as is determined, as herein provided, to have been charged for operations in other states taxing such premium on operations in such states of an insured maintaining its headquarters office in this state. (b) The premium for any operations outside of this state of an insured who maintains a headquarters operating office outside of this state and a branch office in this state. A penalty of 10 percent of the amount of the payment due shall be levied upon and paid by any surplus line broker who fails to make the necessary payment within the time required, plus interest at the rate of 1 percent per calendar month or fraction thereof, from March 1, the due date of the annual tax, until the date the payment is received by the commissioner. The penalty and interest shall be applied as prescribed in Section 12636.5 of the Revenue and Taxation Code. The commissioner, upon a showing of good cause, may extend for not to exceed 30 days, the time for filing a tax return or paying any amount required to be paid with the return. The extension may be granted at any time, provided that a request therefor is filed with the commissioner within, or prior to, the period for which the extension may be granted. Any surplus line broker to whom an extension is granted shall, in addition to the tax, pay interest at the rate of 1 percent per month or fraction thereof from March 1, until the date of payment. The commissioner may remit the penalty in a case where the commissioner finds, as a result of examination or otherwise, that the failure of or delay in payment arose out of excusable mistake or excusable inadvertence. For any part of a payment required by this section or by Section 1775.4 which was not made within the time required by law, when such nonpayment or late payment was due to fraud on the part of the broker, a penalty of 25 percent of the amount unpaid shall be added thereto, in addition to all other penalties otherwise imposed. SEC. 9. Section 12921.1 of the Insurance Code is amended to read: 12921.1. (a) The commissioner shall establish a program on or before July 1, 1991, to investigate complaints and respond to inquiries received pursuant to Section 12921.3, to comply with Section 12921.4, and, when warranted, to bring enforcement actions against insurers or production agencies, as those terms are defined in subdivision (a) of Section 1748.5. The program shall include, but not be limited to, the following: (1) A toll-free number published in telephone books throughout the state, dedicated to the handling of complaints and inquiries. (2) Public service announcements to inform consumers of the toll-free telephone number and how to register a complaint or make an inquiry to the department. (3) A simple, standardized complaint form designed to assure that complaints will be properly registered and tracked. (4) Retention of records on complaints for at least three years after the complaint has been closed. (5) Guidelines to disseminate complaint and enforcement information on individual insurers to the public, that shall include, but not be limited to, the following: (A) License status. (B) Number and type of complaints closed within the last full calendar year, with analogous statistics from the prior two years for comparison. The proportion of those complaints determined by the department to require that corrective action be taken against the insurer, or leading to insurer compromise, or other remedy for the complainant, as compared to those that are found to be without merit. This information shall be disseminated in a fashion that will facilitate identification of meritless complaints and discourage their consideration by consumers and others interested in the records of insurers. (C) Number and type of violations found, by reference to the line of insurance and the law violated. (D) Number and type of enforcement actions taken. (E) Ratio of complaints received to total policies in force, or premium dollars paid in a given line, or both. Private passenger automobile insurance ratios shall be calculated as the number of complaints received to total car years earned in the period studied. (F) Any other information the department deems is appropriate public information regarding the complaint record of the insurer that will assist the public in selecting an insurer. However, nothing in this section shall be construed to permit disclosure of information or documents in the possession of the department to the extent that the information and those documents are protected from disclosure under any other provision of law. (6) Procedures and average processing times for each step of complaint mediation, investigation, and enforcement. These procedures shall be consistent with those in Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 for complaints within the purview of that article, consistent with those in Article 7 (commencing with Section 1858) of Chapter 9 of Part 2 of Division 1 for complaints within the purview of that article, and consistent with any other provisions of law requiring certain procedures to be followed by the department in investigating or prosecuting complaints against insurers or production agencies. (7) A list of criteria to determine which violations should be pursued through enforcement action, and enforcement guidelines that set forth appropriate penalties for violations based on the nature, severity, and frequency of the violations. (8) Referral of complaints not within the department's jurisdiction to appropriate public and private agencies. (9) Complaint handling goals that can be tested against surveys carried out pursuant to subdivision (a) of Section 12921.4. (10) Inclusion in its annual report to the Governor, required by Section 12922, detailed information regarding the program required by this section, that shall include, but not be limited to: a description of the operation of the complaint handling process, listing civil, criminal, and administrative actions taken pursuant to complaints received; the percentage of the department's personnel years devoted to the handling and resolution of complaints; and suggestions for legislation to improve the complaint handling apparatus and to increase the amount of enforcement action undertaken by the department pursuant to complaints if further enforcement is deemed necessary to insure proper compliance by insurers or production agencies with the law. (b) The commissioner shall promulgate a regulation that sets forth the criteria that the department shall apply to determine if a complaint is deemed to be justified prior to the public release of a complaint against a specifically named insurer or production agency. (c) The commissioner shall provide to the insurer or production agency a description of any complaint against the insurer or production agency that the commissioner has received and has deemed to be justified at least 30 days prior to public release of a report summarizing the information required by this section. This description shall include all of the following: (1) The name of the complainant. (2) The date the complaint was filed. (3) A succinct description of the facts of the complaint. (4) A statement of the department's rationale for determining that the complaint was justified that applies the department's criteria to the facts of the complaint. (d) An insurer shall provide to the department the name, mailing address, telephone number, and facsimile number of a person whom the insurer designates as the recipient of all notices, correspondence, and other contacts from the department concerning complaints described in this section. The insurer may change the designation at any time by providing written notice to the Consumer Services Division of the department. (e) For the purposes of this section, notices, correspondence, and other contacts with the designated person shall be deemed contact with the insurer. SEC. 9.5. Section 12921.1 of the Insurance Code is amended to read: 12921.1. (a) The commissioner shall establish a program on or before July 1, 1991, to investigate complaints and respond to inquiries received pursuant to Section 12921.3, to comply with Section 12921.4, and, when warranted, to bring enforcement actions against insurers or production agencies, as those terms are defined in subdivision (a) of Section 1748.5. The program shall include, but not be limited to, the following: (1) A toll-free telephone number published in telephone books throughout the state, dedicated to the handling of complaints and inquiries. (2) Public service announcements to inform consumers of the toll-free telephone number and how to register a complaint or make an inquiry to the department. (3) A simple, standardized complaint form designed to assure that complaints will be properly registered and tracked. (4) Retention of records on complaints for at least three years after the complaint has been closed. (5) Guidelines to disseminate complaint and enforcement information on individual insurers to the public, that shall include, but not be limited to, the following: (A) License status. (B) Number and type of complaints closed within the last full calendar year, with analogous statistics from the prior two years for comparison. The proportion of those complaints determined by the department to require that corrective action be taken against the insurer, or leading to insurer compromise, or other remedy for the complainant, as compared to those that are found to be without merit. This information shall be disseminated in a fashion that will facilitate identification of meritless complaints and discourage their consideration by consumers and others interested in the records of insurers. (C) Number and type of violations found, by reference to the line of insurance and the law violated. For the purposes of this subparagraph, the department shall separately report this information for health insurers. (D) Number and type of enforcement actions taken. (E) Ratio of complaints received to total policies in force, or premium dollars paid in a given line, or both. Private passenger automobile insurance ratios shall be calculated as the number of complaints received to total car years earned in the period studied. (F) Any other information the department deems is appropriate public information regarding the complaint record of the insurer that will assist the public in selecting an insurer. However, nothing in this section shall be construed to permit disclosure of information or documents in the possession of the department to the extent that the information and those documents are protected from disclosure under any other provision of law. (6) Procedures and average processing times for each step of complaint mediation, investigation, and enforcement. These procedures shall be consistent with those in Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 for complaints within the purview of that article, consistent with those in Article 7 (commencing with Section 1858) of Chapter 9 of Part 2 of Division 1 for complaints within the purview of that article, and consistent with any other provisions of law requiring certain procedures to be followed by the department in investigating or prosecuting complaints against insurers or production agencies. (7) A list of criteria to determine which violations should be pursued through enforcement action, and enforcement guidelines that set forth appropriate penalties for violations based on the nature, severity, and frequency of the violations. (8) Referral of complaints not within the department's jurisdiction to appropriate public and private agencies. (9) Complaint handling goals that can be tested against surveys carried out pursuant to subdivision (a) of Section 12921.4. (10) Inclusion in its annual report to the Governor, required by Section 12922, detailed information regarding the program required by this section, that shall include, but not be limited to: a description of the operation of the complaint handling process, listing civil, criminal, and administrative actions taken pursuant to complaints received; the percentage of the department's personnel years devoted to the handling and resolution of complaints; and suggestions for legislation to improve the complaint handling apparatus and to increase the amount of enforcement action undertaken by the department pursuant to complaints if further enforcement is deemed necessary to ensure proper compliance by insurers or production agencies with the law. (b) The commissioner shall promulgate a regulation that sets forth the criteria that the department shall apply to determine if a complaint is deemed to be justified prior to the public release of a complaint against a specifically named insurer or production agency. (c) The commissioner shall provide to the insurer or production agency a description of any complaint against the insurer or production agency that the commissioner has received and has deemed to be justified at least 30 days prior to public release of a report summarizing the information required by this section. This description shall include all of the following: (1) The name of the complainant. (2) The date the complaint was filed. (3) A succinct description of the facts of the complaint. (4) A statement of the department's rationale for determining that the complaint was justified that applies the department's criteria to the facts of the complaint. (d) An insurer shall provide to the department the name, mailing address, telephone number, and facsimile number of a person whom the insurer designates as the recipient of all notices, correspondence, and other contacts from the department concerning complaints described in this section. The insurer may change the designation at any time by providing written notice to the Consumer Services Division of the department. (e) For the purposes of this section, notices, correspondence, and other contacts with the designated person shall be deemed contact with the insurer. SEC. 10. Section 12921.15 of the Insurance Code is amended to read: 12921.15. (a) On or before July 1, 1999, the commissioner shall prepare a written report, to be made available by the department to interested individuals upon written request, that details complaint and enforcement information on individual insurers in accordance with guidelines established under paragraph (5) of subdivision (a) of Section 12921.1. The report shall be made available by mail through the department's consumer toll-free telephone number and through the department's Internet website and transmitted via electronic mail if the individual has the ability to obtain the report in this manner. No complaint information shall be included in the report required by this section that has not been provided to the insurer in accordance with subdivision (c) of Section 12921.1 (b) The commissioner may also, if deemed appropriate, publish the record of complaints against the production agency that have been determined by the department to be justified and that will assist the public in selecting a production agency. No complaint data shall be published that has not been provided to the production agency in accordance with subdivision (c) of Section 12921.1. SEC. 11. Section 12921.3 of the Insurance Code is amended to read: 12921.3. (a) The commissioner, in person or through employees of the department, shall receive complaints and inquiries, investigate complaints, prosecute insurers or production agencies when appropriate and according to guidelines determined pursuant to Section 12921.1, and respond to complaints and inquiries by members of the public concerning the handling of insurance claims, including, but not limited to, violations of Article 10 (commencing with Section 1861) of Chapter 9 of Part 2 of Division 1, by insurers or production agencies, or alleged misconduct by insurers or production agencies. (b) The commissioner shall not decline to investigate complaints for any of the following reasons: (1) The insured is represented by an attorney in a dispute with an insurer, or is in mediation or arbitration. (2) The insured has a civil action against an insurer. (3) The complaint is from an attorney, if the complaint is based upon evidence or reasonable beliefs about violations of law known to an attorney because of a civil action. (c) The commissioner may defer the investigation until the finality of a dispute, mediation, arbitration, or civil action involving the claim is known. (d) The commissioner, as he or she deems appropriate, and pursuant to Section 12921.1, shall provide for the education of, and dissemination of information to, members of the general public or licensees of the department concerning insurance matters. SEC. 12. Section 12253.5 of the Revenue and Taxation Code is repealed. SEC. 13. Section 9.5 of this bill incorporates amendments to Section 12921.1 of the Insurance Code proposed by both this bill and SB 367. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2006, (2) each bill amends Section 12921.1 of the Insurance Code, and (3) this bill is enacted after SB 367, in which case Section 9 of this bill shall not become operative. SEC. 14. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.